Under the new Companies Act, 2013, all profitable companies with a sizable business will have to spend every year at least 2 per cent of three-year average profit on CSR works.

Finance Minister P. Chidambaram has said if corporates spend 2 per cent of their profit on CSR activities, then it will have a multiplier effect in bringing out much greater inclusiveness.

"Corporate Social Responsibility (CSR) is now mandatory. The mandate is that corporates must spend 2 per cent of their profit on CSR, I think if 2 per cent of India's corporates profit is spent on CSR activities then it will have great multiplier effect in bringing out much greater inclusiveness," Chidambaram said at an event.

Under the new Companies Act, 2013, all profitable companies with a sizable business will have to spend every year at least 2 per cent of three-year average profit on CSR works.

This would apply to companies with a turnover of Rs 1,000 crore and more, or networth of Rs 500 crore and more, or a net profit of Rs 5 crore and more. The new rules would be applicable from fiscal 2014-15.

The new rules also require the companies to set up a CSR committee, including at least one independent director.

Recently, Corporate Affairs Minister Sachin Pilot has said: "Our assessment is that if every company that is qualified for doing the CSR does so, then Rs 15,000-20,000 crore would be spent in a year in various projects such as environment, skill development, water, sanitation, etc."

The companies have been asked to give preference to their local area of operations for such CSR activities, while those not being able to spend the required amount would need to specify the reasons for the same in their annual CSR report.